How to Correctly Record Your Sales Tax Installment Payments

Posted by on Jul 28, 2011 in Sales Tax | 8 comments

It’s not uncommon for Non-Profits, Charities or For Profit companies to make HST Sales Tax Installments. There are many reasons for this and one may be that the Non-Profit or Charities organization, has only registered to file annually or that it’s sales base is below the CRA threshold.

The second may be that the annual filer does not want to face an unexpected amount at the due date, which could result in a shortage of funds. It’s a lot easier to budget for it quarterly.

Reason number three may be that the For Profit company has fallen behind it’s quarterly remittances, and due to cash flow problems, can only afford to make installment payments to CRA. This is a lot more responsible than having the CRA shut down your business due to any type of taxes outstanding.

I have come across far too many bookkeepers and even some accountants, who use the wrong QuickBooks feature to record these installments. So I’m going to show you the correct method.

First of all, make sure that you have a Sales Tax Item called HST Installment set up, which points to your HST Payable account (as shown on the left). If it does not point to the HST Payable account, the installment amount will not show up.

Next, go to the Home page and in the Banking module click on the Write Cheques icon. When that screen appears, work your way down the fields starting with Bank Account through to the Memo field. The next step is where most make their mistake.

Instead on clicking on the Expenses tab, click on the ITEM tab! Using the Expense tab will result in an unassigned amount and error when you go to use your File Sales Tax feature, and when you print your Tax Agency Detail Report.

In the Item field choose the HST Installment item and tab your way to the Amount field inserting the figure you are going to pay. DO NOT select a Tax Code, a Customer or check the Billable column. If  QuickBooks wants to default to the Receiver General, than accept that.

To your left is displayed the journal entry that QuickBooks will make, which will not cause an unassigned error when using the File Sales Tax feature.

If you are an annual filer my recommendation to you would be for you change to quarterly remittance, which will hopefully be easier on your cash flow.

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8 Responses to “How to Correctly Record Your Sales Tax Installment Payments”

  1. Hi
    Why my quickbooks shows 2012 Hst installment on 2013 when I open tax agency report. I want to get rid of this. Please help me.

  2. Miranda says:

    Hello,

    When I follow your instructions using QuickBooks 2013 Premier Accountant Edition the HST Installment item does not show up as an option in my items drop down menu. None of my sales tax items do. How can I fix that?

    Cheers,

    • Miranda says:

      I have solved the problem. It is important to note that the HST sales tax item must be set up with a dollar amount and not a percentage amount. I left the dollar amount at zero and this fixed the problem!

  3. Can this procedure be done with a journal entry as I remit monthly online.

    • Hi Chuck, yes it can be done with a journal entry BUT, you must make sure that on your Tax Payable line – in the column that has the Header – TAX ITEM, that you choose the HST/GST Installment, That way you won’t have any sales item errors.

  4. sheila davis says:

    When i do as you suggest there is no ITEM tab available on the cheque.

    now what?

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